As Congress continues to deliberate the federal legalization of marijuana, the cannabis industry continues to face scrutiny from the IRS under Section 280E of the Internal Revenue Code (Code). Enacted in 1982 in response to a U.S. Tax Court case that allowed a drug dealer to deduct expenses in connection with his illegal activities, Section 280E provides: No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

Sean Hocking, Cannabis Law Report, 04/26/2021 02:29:00

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